Tool Kit Offers Strategies for Preserving Affordable Housing - The Annie E. Casey Foundation

Tool Kit Offers Strategies for Preserving Affordable Housing

Posted August 18, 2020
By the Annie E. Casey Foundation
Communities must preserve affordable housing for families

Unsub­si­dized afford­able small- to medi­um-scale mul­ti­fam­i­ly rental units are a vital source of hous­ing for fam­i­lies of col­or that is being threat­ened amid the coro­n­avirus pan­dem­ic as investors buy prop­er­ty from finan­cial­ly bur­dened own­ers. Tip­ping the Scale from Enter­prise Com­mu­ni­ty Part­ners, a tool kit pro­duced with sup­port from the Annie E. Casey Foun­da­tion and oth­er fun­ders, edu­cates non­prof­its, fun­ders and devel­op­ers on pre­serv­ing the country’s sup­ply of these afford­able units.

Afford­able hous­ing and the pandemic

To be con­sid­ered afford­able, hous­ing in the Unit­ed States can­not cost more than 30% of a household’s income. Unfor­tu­nate­ly, as rent and home prices con­tin­ue to climb, low- and mod­er­ate-income house­holds often strug­gle to find hous­ing that meets this def­i­n­i­tion. The pan­dem­ic has spurred addi­tion­al finan­cial pres­sures for many fam­i­lies and could cause as many as 15 mil­lion mort­gage defaults. In antic­i­pa­tion, pri­vate equi­ty firms are rais­ing mon­ey to buy dis­tressed prop­er­ties like homes and apart­ment build­ings. These out­side invest­ments could increase home and rent prices in low-income neigh­bor­hoods, which are dis­pro­por­tion­ate­ly com­posed of house­holds of col­or.

Now, the preser­va­tion of afford­able hous­ing is even more crit­i­cal — par­tic­u­lar­ly the preser­va­tion of small- to medi­um-scale mul­ti­fam­i­ly (SMMF) rental units. SMMF prop­er­ties (res­i­den­tial build­ings with two to 49 units) are an impor­tant part of unsub­si­dized afford­able hous­ing, rep­re­sent­ing 54% of the nation’s rental stock. The tool kit specif­i­cal­ly tar­gets prop­er­ties that don’t receive project-lev­el sub­si­dies but often still accept ten­ant-based rental assistance.

Pro­mot­ing afford­able hous­ing in low-income communities

Accord­ing to the tool kit, com­mu­ni­ty part­ners can pro­mote invest­ment in low-income neigh­bor­hoods and strength­en local economies by acquir­ing and restor­ing these prop­er­ties. New con­struc­tion usu­al­ly costs 30% to 50% more than restor­ing exist­ing SMMF prop­er­ties, mak­ing preser­va­tion a cost-effec­tive path for grow­ing the sup­ply of afford­able housing.

The tool kit out­lines best prac­tices in:

  • Rela­tion­ship build­ing. Strong part­ner­ships with own­ers and bro­kers are cen­tral to mov­ing SMMF hous­ing preser­va­tion projects through devel­op­ment, but there aren’t many exam­ples of such part­ner­ships. With­out expe­ri­ence and estab­lished routes of action, part­ners often have to nav­i­gate new ter­ri­to­ry together.
  • Prop­er­ty iden­ti­fi­ca­tion. Unsub­si­dized afford­able SMMF hous­ing is not reg­u­lat­ed, which makes it dif­fi­cult for devel­op­ers to rec­og­nize prop­er­ties with poten­tial. The tool kit shows how to eval­u­ate prop­er­ty char­ac­ter­is­tics, project fea­si­bil­i­ty, neigh­bor­hood mar­ket con­di­tions and neigh­bor­hood access when decid­ing whether to invest in a property.
  • Secur­ing financ­ing. The tool kit lists a num­ber of resources for financ­ing unsub­si­dized afford­able SMMF prop­er­ties. It also con­tains an inter­ac­tive mod­el­ing tool that fun­ders and non­prof­its can use to deter­mine if their restora­tion projects are feasible.
  • Nego­ti­a­tion and deal clos­ing. There are a few com­mon obsta­cles when clos­ing on unsub­si­dized afford­able SMMF prop­er­ties — for exam­ple, appraisal gaps and evi­dence of haz­ardous mate­ri­als on the prop­er­ty. To avoid such snags, the tool kit pro­vides guid­ance on how to iden­ti­fy poten­tial issues and nego­ti­ate major deal points early.
  • Reha­bil­i­ta­tion. Unsub­si­dized afford­able SMMF prop­er­ties tend to be old­er and in need of main­te­nance. The tool kit guides fun­ders on fac­tors that affect reha­bil­i­ta­tion — for exam­ple, zone and build­ing codes, health and safe­ty needs, ener­gy effi­cien­cy and dis­as­ter resilience. Res­i­dents and com­mu­ni­ty mem­bers can also pro­vide vital insight into risks asso­ci­at­ed with cer­tain prop­er­ties and help with gov­ern­ment approval.
  • Prop­er­ty man­age­ment. Sta­ble occu­pan­cy and rent pay­ments are crit­i­cal for main­tain­ing unsub­si­dized afford­able SMMF prop­er­ties, but rental income often can’t cov­er a full-time prop­er­ty man­ag­er. The tool kit shows how part­ner­ing with oth­er prop­er­ty own­ers, invest­ing in durable mate­ri­als and min­i­miz­ing com­pli­ance require­ments for ten­ants can low­er the cost bur­den of maintenance.

The tool kit close­ly exam­ines fac­tors spe­cif­ic to SMMF prop­er­ties in Mia­mi, Flori­da, and Atlanta, Geor­gia, where Enter­prise Com­mu­ni­ty Part­ners gath­ered local data on SMMF prop­er­ties and income lev­els. In both cities, plan­ners have already includ­ed the preser­va­tion of unsub­si­dized afford­able SMMF hous­ing in their afford­able hous­ing strategies.

Ongo­ing efforts to restore low-income communities

Safe, sta­ble hous­ing is one of the cor­ner­stones to thriv­ing com­mu­ni­ties. A recent case study details the Casey Foundation’s efforts to revi­tal­ize and pre­serve afford­able homes in Atlanta’s Pitts­burgh neigh­bor­hood, which has faced some of the high­est pover­ty and unem­ploy­ment rates in the state. As part of this ini­tia­tive, which began in 2009 in the wake of the Great Reces­sion, the Foun­da­tion and its part­ners ren­o­vat­ed 43 homes, while also advanc­ing mul­ti­fam­i­ly preser­va­tion through tech­ni­cal assis­tance to prop­er­ty own­ers, sup­port­ing acqui­si­tion financ­ing and pro­vid­ing con­sult­ing sup­port to a local hous­ing task force.

The lessons from this long­stand­ing effort and the new tool kit on mul­ti­fam­i­ly hous­ing are par­tic­u­lar­ly rel­e­vant now that the coro­n­avirus pan­dem­ic has caused new threats to hous­ing sta­bil­i­ty, par­tic­u­lar­ly for fam­i­lies of col­or. Afford­able hous­ing can be pre­served through sus­tained and tar­get­ed action,” says Natal­lie Keis­er, a senior asso­ciate at Casey who leads the Foundation’s com­mu­ni­ty devel­op­ment efforts in Atlanta. The Tip­ping the Scale Toolk­it is a resource for tak­ing effec­tive action to retain small mul­ti­fam­i­ly hous­ing — a crit­i­cal com­po­nent of inclu­sive, equi­table communities.”

To learn more about the Tip­ping the Scale Toolk­it and its finan­cial mod­el­ing tool, reg­is­ter for one of Enter­prise Com­mu­ni­ty Part­ners’ free webi­na­rs on pre­serv­ing afford­able mul­ti­fam­i­ly hous­ing in Mia­mi and Atlanta. The Mia­mi webi­nar will take place at 1 p.m. ET on Aug. 19 and the Atlanta webi­nar is sched­uled for 10 a.m. ET on Aug. 21.

Read more about the Casey Foundation’s work on housing

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